How much should you save for retirement?
I believe everyone should be saving at least 20-30% of their income. By saving, I mean putting it away or investing it for retirement. If you are saving for a holiday, or a car, that is not saving. Neither is saving for a house deposit or similar.
Saving for this post is saving money for emergencies (your emergancy fund should be enough to pay for emergencies or pay your living expenses if you are out of work or sick) or saving and investing for retirement.
We wrote about some strategies for saving in an earlier post and about my situation in another one.
I used to find it very difficult to save. A lot of months I would spend more than I earned, resulting in credit card debt, spending down savings, or borrowing from friends and family.
Now we save 50%+ effortlessly.
So what changed? Well, my income went up, but I don't think that is a major factor. My expenses went down as my stepkids are now all independent, but I don't think that is a major factor either. I could easily have blown the extra money the way I did back then.
In my opinion the three huge factors that helped me take my regular saving rate from 0 to 50%+ were changing my mindset, cutting my big regular expenses, and automating saving.
The mindset was the key. Thinking of saving as 'buying investments' meant that I tried to find money to invest, and ended up preferring to buy shares rather than gadgets or clothes.
We bought our car for cash fifteen years ago and have been driving it ever since. We bought our manshon cheaply so the monthly mortgage payment is under 30,000 yen. I switched from Softbank to Aeon mobile so now I pay 6,000-7,000 yen less every month. We cancelled a few insurance policies we no longer needed.
Automation is a killer app because it takes the decisionmaking out of saving. At the beginning of the month set amounts go into my investments. This happens every month on payday. I don't even notice it any more.
Many people will react to this post by coming up with reasons why they can't save. That is fine. Whether you save or not is up to you. No one can do it for you. But there is a good chance you are defaulting to the loser response.
Life is much better when you have your finances sorted out. I was talking to my wife the other day and we talked about how we hadn't worried (or even thought much) about lack of money for a couple of years now. We still have problems but money isn't one of them.
All you need to do to get to that stage is earn more, spend less, and invest the difference.